2024-11-04 22:00

The Global Dollar Network, whose participants will earn yield for helping foster adoption of USDG, also includes Anchorage Digital, Bullish, Galaxy Digital and Nuvei. The USDG stablecoin is issued out of Singapore by Paxos, and is broadly in line with the Monetary Authority of Singapore's upcoming stablecoin framework. Income derived from USDG’s reserves will be shared among the initial Global Dollar Network partners, which are Anchorage Digital, Bullish, Galaxy Digital, Kraken, Nuvei, Paxos and Robinhood. A group of heavy hitters in the cryptocurrency space are backing a new, regulation-focused stablecoin, the Global Dollar (USDG), which aims to return yield earned on its reserve assets to participants who help accelerate its adoption. Dubbed the Global Dollar Network, the original partners are Anchorage Digital, Bullish (the owner of CoinDesk), Galaxy Digital, Kraken, Nuvei, Paxos and Robinhood. The USDG stablecoin is issued out of Singapore by Paxos, and is “substantively compliant” with the Monetary Authority of Singapore's upcoming stablecoin framework, according to a press release. “This is meant to really be a community token,” said Paxos CEO Charles Cascarilla in an interview. “Anybody can join the Global Dollar Network and accrue rewards for activity. We're distributing something like 97% of the economics. That's a big difference from how other stablecoins have been set up and created to date.” Stablecoins are a big business which has been dominated by two giants, Tether – whose (USDT) is the largest stablecoin by a wide margin – and the next biggest, Circle and its (USDC). Unlike the new USDG, both Tether and Circle retain all the interest from reserves. There are other yield-sharing stablecoins as well as some interesting protocol-level innovation from the likes of the M^0 project. Income generated from USDG’s reserves, which like many stablecoins are U.S. Treasuries, will be shared out among participants based on the ways these firms can create connectivity and liquidity, Cascarilla said. “The way we have set this up is that the participants are being rewarded for activity that helps grow the utility of the network,” he said. “That could be for a number of activities; different participants can be rewarded in different ways, because not everyone does the same thing, and that's actually what makes a thriving ecosystem.” By rewarding participant companies rather than end users of the platform, the USDG stablecoin is available in the U.S. via the footprint of the distribution partners, such as Anchorage, which operates in all 50 U.S. states. DBS Bank, Southeast Asia’s largest bank by assets, will serve as the primary banking partner at launch for cash management and custody of USDG reserves. https://www.coindesk.com/business/2024/11/04/new-global-dollar-stablecoin-backed-by-robinhood-kraken-paxos-and-other-crypto-heavies/

2024-11-04 20:03

Bitcoin mining could eventually help develop a global index for the price of electricity, according to Sangha Renewables President Spencer Marr. Bitcoin mining firm Sangha Renewables aims to help renewable energy companies start their own bitcoin mines. Green power producers often struggle with stranded energy and are even sometimes forced to pay the market to take excess electricity. Sangha is closing a 19.9 MW deal to open its first facility in West Texas; the operation is projected to generate 900 bitcoin over the next 10 years. What if renewable energy companies mined bitcoin? That's essentially the question that Spencer Marr, the charismatic 37-year-old president of bitcoin (BTC) mining firm Sangha Renewables, asked himself at the tail end of the 2017 crypto bull market, in what he describes as a eureka moment. Today, his idea is one step closer to becoming reality, with his firm set to sign a 19.9 megawatt (MW) deal — enough power to energize about 4,000 homes — with a major renewable energy company in West Texas. And he does not plan to stop there. "We're talking about gigantic companies," Marr told CoinDesk during a series of interviews. "We're now getting third, fourth, fifth meetings with them." The pitch? Help the company turn otherwise wasted electrons into valuable digital currency. The hope? For every independent power producer to eventually adopt a similar business model. It's no easy task. Giant energy companies are extremely conservative by nature, and slow to adopt new technologies. "Bitcoin is still this exotic thing they don't understand. 'And what if it goes to zero?' But that's changing with the ETF," Marr said, referencing the spot bitcoin exchange-traded funds that launched in the U.S. in January with support from major Wall Street firms. "Now they see that BlackRock is involved, and it changes their perception." Not only could bitcoin mining upend how the power business works, but the adoption of the technology, at scale, could eventually create a new way of tracking energy prices, according to Marr. "Just as Brent provides a global index for the price of crude oil, I think bitcoin mining will, over time, create a global index for the price of electricity," said Marr, who has a background in law and helped New York City increase its renewable energy systems. To spur interest, Sangha has moved away — at least for now — from trying to convince energy producers to run bitcoin mines themselves. Instead, the negotiations are now about giving Sangha exclusive rights to purchase the electricity and operate the mine, without the power producers needing to put up any cash. "In a lot of conversations, they'll be like, 'Wait, so what's the catch?'" Marr said. "We tell them there's no catch. This is real." Turning wasted energy into crypto profits One of the constraints large renewable energy companies often face is trapped energy — they produce electricity that nobody can consume. A wind farm, for example, may generate a lot of electricity on a windy night — right when everyone is asleep and consumption is lowest. Unlike other commodities, electricity is instantaneous; for the most part, it must still be consumed in the moment, since, even though the cost to store that power in batteries has come down, it's still too expensive to be used at scale by the industry. In many cases, the renewable firms are forced to pay the market to take their energy from them, meaning that the excess electricity turns out to be a net negative for these companies. Transmitting electricity from one place to another is also tricky. Not only is energy lost in the process, but most of the U.S. electrical grid is over 50 years old, and revamping it is a costly task that involves numerous stakeholders with competing interests. "The grid was designed for stable energy generation in proximity to where it would be consumed," Mike Cohen, CEO of Pow.re, a bitcoin mining company that makes infrastructure investments in renewable energy grids, told CoinDesk. "Wind and solar are geographically dependent on areas where production conditions are right." This is where bitcoin mining, Marr realized, can provide a profitable solution. If a solar plant, or a wind farm, has the ability to convert, nearly instantly, its excess electricity into bitcoin instead of selling it at a loss, renewable energy companies could significantly boost their revenue. That, in turn, would make the financing of new green energy projects more palatable, and reduce the industry's need for government subsidies. Contrary to other types of data centers, like artificial intelligence clusters, which need almost 100% uptime, bitcoin mines can be turned on and off with a flick of a switch when the cost of electricity gets too high for the operation to remain profitable. Spun up in July 2020, the West Texas solar plant — operated by "one of the top five energy companies globally," Marr told CoinDesk without disclosing the firm's name — has been forced to sell 10.1% of its total energy generation at a loss, according to a Sangha pitch deck. But the bitcoin mine, once it goes live in spring of 2025, is designed to create a price floor by absorbing that excess energy and boost the site's revenue by 3.7%. With bitcoin mining's use of energy being a hot topic for debate, the deal would be sort of a vindication for the industry, potentially providing a proof-of-concept that mining can be a legitimate tool for the development of renewable energy in the U.S. The folks at Sangha aren't the only ones working on this either. There's Satoshi Energy, for example, a firm that develops mining sites for energy companies and then partners the companies up with experienced bitcoin miners, which then run the operations. "We've had conversations with [the Sangha team] in the past and appreciate their contributions to the growth of the Bitcoin ecosystem," Andrew Myers, the firm's founder, told CoinDesk. "Welcome to West Texas!" Pushing renewable energy companies to operate their own bitcoin mines is "not a totally new idea, but basing an entire business on it in the U.S. is likely innovative," Taras Kulyk, the CEO of Synteq Digital, a firm that provides hardware and infrastructure needs for bitcoin miners, told CoinDesk. "Bhutan, Australia, and Ethiopia are all jurisdictions where this [kind of effort] is active that we're aware of and have helped on." 'Welcome to West Texas!' Marr is acutely aware that the West Texas facility is just a pilot project, and the road ahead is still long. "We're not looking to just do this one deal and go home," he said. The energy company has other locations in need for that kind of infrastructure — and its competitors are interested, too, Marr said. "We're proving that we have what it takes to go the distance." However, the project won't be scaling up immediately due to regulatory reasons. "You can't go past 20 megawatts without needing a bunch of special permissions that take longer to get," Marr said. "Pending final approval, we can go up to 110 megawatts, but we can't get that started until July of 2026." For context, 20 MW is enough to power 4,000 homes, according to the Electric Reliability Council of Texas (ERCOT), the Lone Star State's electrical grid operator. Assuming the deal goes through, Sangha will, through a series of subsidiaries, own the miner and purchase electricity from the energy company, but the idea, according to Marr, is for the energy company to eventually vertically integrate the operation and mine the bitcoin itself — with Sangha acting in an advisory capacity. "They're open-minded about that possibility in the future, but they're not ready for it yet," Marr said. The operation is projected to bring in $42 million in revenue in the first 12 months, and mine roughly 900 bitcoin over the next 10 years, according to the pitch deck. It will have access to electricity for anywhere between 2.8 cents and 3.2 cents per kilowatt-hour on a 30-year lease, meaning that investors will be able to acquire bitcoin at a 25% to 50% discount. "This will basically stay true over time regardless of the absolute value of bitcoin at any given moment," Marr said. For comparison, B Riley Securities recently said that the estimated average power costs for the sector is around 4.5 cents per kilowatt-hour. Part of the pitch is that the energy company itself doesn't have to pay for anything. Sangha is raising $10.7 million from investors of all stripes — small funds or high net worth individuals with interests in real estate, energy, bitcoin mining or crypto in general. A bank will provide an additional $25 million loan secured against the project's assets, like its mining equipment and electrical infrastructure. Meanwhile, Sangha profits from fees at various stages of the project development, including construction management, the overseeing of the site, the asset management and ownership distributions. The firm is set to finalize the contracts for the mine by Nov. 30, Marr said. Construction should begin in January 2025, and the operation should come online in April or May of the same year. Creating a global electricity index What does it mean for the future of bitcoin mining — and the renewable energy industry — if Marr is right? The Sangha co-founder's theory is that, down the line, if energy providers all over the world begin operating their own bitcoin mines, the electricity market will radically change and go global. "Picture wheat, or oil or gold. … There's a physical product, you can put it in a shipping container, and therefore it's easy to trade it on an international scale regardless of where it is extracted," Marr said. "Electricity hasn't been capable of this because its production and consumption is local. There's no such thing as generating an electron in Texas and selling it in China." Bitcoin changes the game, according to Marr, because miners have the option of refining local electricity into a digital commodity that can then be traded on a global network. "The market doesn't give a sh*t where a specific bitcoin is mined," Marr said. In other words, it's not so much storing electricity like in a battery, but converting it into something new, which has different properties — an alchemical process, according to Marr. And as the bitcoin network scales, energy providers will become increasingly aware of the asymmetry between the local value and the global value (via bitcoin) of the electricity they generate. "In theory, we could trade electricity [intercontinentally] in microseconds, because firms will constantly be determining where their electricity is being valued the highest," Marr said. Marr's claim might sound bold and futuristic, yet it's important to know that other parts of the energy sector have already dipped their toes into bitcoin mining — for example, oil and gas companies have been looking into incorporating bitcoin mining to reduce the so-called flaring of natural gas since at least 2019. So how does one calculate the global price of electricity? Turns out, according to Marr, it's remarkably simple, if using bitcoin mining metrics. "You could do it at a machine level, at a fleet-wide level or at a network level," Marr said. "But you take the hash price [a measure of mining profitability], divide it by miner efficiency and you immediately derive your revenue per megawatt-hour." CORRECTION (Nov. 4, 2024, 21:09 UTC): Sangha Renewables currently aims to get exclusive rights to buy electricity from renewable energy companies and operate the bitcoin mines itself. An earlier version of this story said Sangha wanted to resell that electricity other miners. https://www.coindesk.com/business/2024/11/04/theres-no-catch-bitcoin-mining-startup-promises-free-money-to-renewable-energy-companies/

2024-11-04 20:00

The manipulation narrative is an attempt by mainstream media to discredit Polymarket’s election odds and control the narrative, one expert said. Mainstream media reports have speculated that Donald Trump's odds on Polymarket are being manipulated for political purposes. Experts in prediction markets interviewed by CoinDesk saw little to no evidence of such manipulation and said any attempts to rig prices would likely be short-lived. The mainstream media discourse about Polymarket sounds like Donald Trump complaining about the 2020 presidential election. Both jump to the conclusion that the thing is rigged. "A French gambler’s $50m of bets inflated Trump’s odds — and is threatening democracy" gasped a headline in the U.K. Independent newspaper. The Wall Street Journal and New York Times have been comparatively measured in tone, but also gave airtime to the theory that someone has been manipulating Polymarket to influence turnout and morale or give Trump an excuse to challenge the results should he lose again. It is true that Polymarket has been signaling a higher probability for the Republican candidate defeating Kamala Harris on Tuesday than forecasters and other prediction markets. Polymarket also confirmed to the Times that a single French national controls several accounts that have been making large bets on Trump winning. That trader told the Journal he had "absolutely no political agenda" and was just trying to make money. For its part, Polymarket told the Times it had found no evidence of manipulation. And several experts in prediction markets interviewed by CoinDesk said they saw little if any. First of all, the French whale's use of multiple accounts suggests an attempt to minimize slippage, or prices moving against a trader placing a large order. "If the goal was to move the price, you'd do the opposite," said Flip Pidot, co-founder and CEO of American Civics Exchange, an over-the-counter dealer in political futures contracts. "Instead of having several accounts trading strategically with limit orders, you'd just keep plowing money in blindly and let yourself get filled at worse and worse prices, since that would be optimal if your goal was to artificially inflate the price." If someone did try to manipulate Polymarket for political reasons, they would be unlikely to succeed more than temporarily, experts told CoinDesk. (A Fortune article alleged a different sort of manipulation — wash trading — that appears to be driven by users trying to earn airdrops of a potential future Polymarket token.) Expected value First, there is the concept of “expected value," where investors take advantage of a trade that would be profitable in the long term. At one point Thursday, for example, it cost 33 cents apiece on Polymarket to place a single wager on Harris winning the election. Each share pays out $1 (in USDC, a stablecoin or cryptocurrency that usually trades one-to-one with U.S. dollars) if she does and zero if not, so the price indicated the market at that time believed she had a 33% chance of winning. If her true probability of winning were actually, say, 50-50, that looks like free money to traders. It's generally a good and profitable idea to buy half-dollars for one-third-dollars, so you'd expect traders to swoop in and buy at the discounted price. As more and more of them rush in, the price dislocation tends to disappear. Put simply: If 33% odds are too low for Harris, bargain hunters will fix that problem. "It's not as if there's a shortage of cash in America to take advantage of a bad price," said Ciaran Murray, CEO and founder of Olas Protocol, a project that is trying to reinvent the news media using prediction markets. (Polymarket blocks U.S. IP addresses to comply with a regulatory settlement, but crafty American traders have been using VPNs to get around the geofencing.) And, it should be noted, in the last few days Harris has climbed to 39.6% as of Monday morning in New York (still leaving Trump at 60.5% and in a large lead). Big firms' participation According to Mike van Rossum, CEO of quantitative trading firm Folkvang Trading, Trump's outperformance on Polymarket has also coincided with increased participation on Polymarket from larger trading firms — the kind one would expect to pounce on an obvious trade. “To effectively trade this you do need quite a lot of infrastructure around poll/reporting data per (swing) state and such, and as the election comes up you need to digest incoming data to adjust your odds,” van Rossum told CoinDesk. “Big trading firms in traditional markets definitely do this since the election will certainly have a big effect on the rest of the economy [and] they can trade in size (equities, commodities, interest rates, etc).” Further, buying shares on prediction markets is not the only "Trump trade" that has been popular lately. In the stock market, private prison and cryptocurrency companies have been among the beneficiaries of bets that the GOP nominee will win. “From what I can see the Polymarket prices seem to be wrapping up the views of smart money pretty well,” said Koleman Strumpf, an economics professor at Wake Forest University in North Carolina. “Wall Street traders on the far deeper and more liquid equities markets are trading in a way that reflects the slight edge we see at Polymarket.” Liquidity While most of the speculation about manipulation has focused on Trump bets, it would be far easier to inflate Polymarket odds in Harris' favor, because of an imbalance in liquidity between the candidates. Currently, Polymarket has racked up $2.5 billion in trading volume on its U.S. election market. From a liquidity perspective, there are more than $50 million worth of resting sell orders in the order book for Trump and $20 million worth for Harris. This means wannabe buyers have that much inventory to trade with for each candidate. As a result, the amount of capital required to move the needle for Harris by 1 percentage point is around $70,000, based on order book data. For Trump, it is more than 10 times as much: $718,000. Yet even $718,000 wouldn't be a big number from the perspective of the French trader, who amassed tens of millions in bets on Trump, supporting Pidot's interpretation that he split orders across accounts to avoid slippage. Cross-market arbitrage A large contributor to market prices generally being efficient (aka reflecting reality) is connected to arbitrage trading across trading venues. Polymarket isn't the only prediction market offering election odds. The largest market in Europe is Betfair, which has £170 million ($220 million) in matched bets, while the likes of Robinhood and Kalshi have also added election markets. The fragmentation of betting across multiple venues means that if prices get out of whack on one platform, that price should almost immediately get knocked back in line with other markets because there is near-instantaneous money to be made by selling the higher price on one platform and buying a lower price on another. “I do expect smaller teams to be picking up easy arbitrages (when different platforms have different odds),” van Rossum added. However, there are a few reasons why odds might be higher for bets on Trump winning (and other outcomes) on Polymarket. For one thing, the platform does not charge trading fees, so traders are willing to pay higher prices. By contrast, Betfair, for example, deducts a "vigorish" of 5% to 10% from the winning bettor's payout, so traders there have to discount their bids. "Waiving fees makes trading more frictionless, which makes it easier for traders to arb between contracts (or between one market and another) to weed out mispricing," said Pidot, of American Civics Exchange. Aaron Brogan, a managing attorney at Brogan Law, noted another possible reason for price discrepancies. Whereas regulated markets like Kalshi are for U.S. residents only, Polymarket's user base is made up of non-U.S. persons (plus naughty Americans using VPNs). "If these distinct groups have different media environments, they could be systematically exposed to different information about the election, and so form different opinions about the probability of certain outcomes," Brogan told CoinDesk. "It's easy to tell a story where Polymarket’s user base tends to get their news from Elon Musk’s X and the regulated markets’ users tend to get their news from Bloomberg and The New York Times," he said. "One side sees a little more pro-Trump content, the other side sees a little more pro-Harris content, and they infer from that that one or the other is more likely to win." To be clear: potential cognitive bias of participants doesn't undermine the informational value of these markets, Brogan added. "People with different priors come to different conclusions, but there’s the idea that the net of these converges to truth," he said. "If neither Polymarket nor the regulated markets are statistically representative samples of interested observers, then they might differ, but the weighted average of these markets together is probably closer to truth than any are individually." Parlor games It's not even clear that inflating Trump's Polymarket odds would have the supposedly intended political effect. Hypothetically, if Russia wanted to manipulate prediction markets to help Trump, "do they push his price up or down? Because I can see that working both ways," said Olas Protocol's Murray. "If they push his price up, you galvanize Harris's base" to show up at the polls, undermining the alleged goal, he said. Pidot has advanced a more prosaic and amusing theory: The French trader is a luxury goods exporter trying to hedge the risk of tariffs in the event Trump wins. (For whatever it's worth: Peter Thiel, whose Founders Fund invested in Polymarket's last funding round, was an early investor in Bullish, two years before that company acquired CoinDesk. Bullish has not disclosed a cap table since 2021, and CoinDesk journalists do not know the current roster of investors in its parent, which is not involved in editorial decisions.) Turning the tables, Harry Crane, a statistics professor at Rutgers University in New Jersey, has a theory about why there have been so many news stories alleging manipulation. “I believe the narrative about manipulation is an attempt by legacy media to discredit these markets, which threatens their ability to control the narrative," he said. https://www.coindesk.com/business/2024/11/04/us-election-betting-polymarket-manipulation-claims-miss-the-mark/

2024-11-04 18:28

Moving bitcoin into pension schemes is “a bold step that reflects the forward-thinking nature of the trustees involved,” pension specialist Cartwright told Corporate Advisor magazine. British pension specialist Cartwright has guided the country's first pension fund to allocate money into bitcoin. The unnamed fund invested 3% of its total assets directly into the token, as opposed to using a proxy such as a spot ETF. Cartwright is also launching a Bitcoin Employee Benefits scheme, which would allow employers to pay bitcoin directly into staff wallets. British pension specialist Cartwright is urging institutional investors to allocate assets into bitcoin (BTC) and has successfully guided the country’s first pension fund to make an allocation into the token, industry magazine Corporate Advisor reported. The unnamed fund last month allocated 3% of its £50 million ($65 million) into bitcoin following “lengthy consultations with the scheme’s trustees, where ESG, investment case and security were all addressed at length,” Glenn Cameron, head of digital assets at Cartwright told Corporate Advisor. This investment is particularly notable as the pension fund actually is investing in the crypto itself, rather than, for instance, a proxy such as an ETF. The private key is split between five independent institutions, according to the report. What's also notable is the relative size of the investment. The State of Wisconsin pension, for instance, made news months ago by being the first U.S. state pension plan to invest in bitcoin (via the spot ETFs). That investment, though, footed to just about 0.1% of the plan's assets. This U.K. pension investment is for a far more sizable 3% of its assets. Cartwright is also launching a Bitcoin Employee Benefits scheme, it said, which will allow employers to pay bitcoin into wallets created for their staff. Currently, five companies are interested in the product, Cartwright said. It is unclear the amount of assets Cartwright currently advises on. The firm has anywhere from 51-200 employees, according to LinkedIn and is based in Hampshire in the U.K. https://www.coindesk.com/business/2024/11/04/first-uk-pension-fund-invests-in-bitcoin/

2024-11-04 16:55

At the same time, crypto investors are looking to reduce risk ahead of the U.S. election, driving bitcoin's crypto-market dominance to a cycle high. BlackRock's long-term U.S. treasury bond ETF, TLT, has dropped 8% year-to-date against bitcoin, which is up 55%. U.S. Treasuries are considered a liquid, global reserve asset. Bitcoin dominance made new highs over the weekend at 60.56% of crypto-market cap. Bitcoin (BTC) is becoming even more dominant in crypto markets and is growing in importance against U.S. Treasuries, the bedrock of the American financial system and among the world's largest and most liquid markets, in a signal some investors may be looking to take on more risk in the search for greater returns. Last week, as the world's largest cryptocurrency approached March's all-time high above $73,000, it was trading at a record 800 times the value of BlackRock's iShares 20+ Year Treasury Bond ETF (TLT). That's up from 466 at the time of BTC's previous peak, in November 2021. Treasuries, backed by the credit of the government of the world's largest economy, are considered among the safest assets to own. They are held by many central banks worldwide as reserve assets because they're seen as a reliable store of value. They also serve as a benchmark for interest rates worldwide, and when yields increase, the price falls and vice versa. That may be an issue for some investors. Since interest rates started rising during the Covid-19 pandemic, we appear to have entered an era of economic uncertainty. Rates are unlikely to drop back to 0% for several reasons: stubborn services inflation, the U.S.'s nearly $2 trillion budget deficit — almost 100% debt to GDP — and conflicts in eastern Europe and the Middle East. The absence of an incentive for price gains may be why the ETF which has $60 billion in total assets, has lost 7% this year, while bitcoin has rallied 55%. The relative performance might indicate that investors could be moving parts of their portfolio to bitcoin from long-term Treasuries. Due to the fundamental properties of bitcoin and with the huge success of the U.S.-listed spot ETFs this year, bitcoin may be starting to emerge as a relatively safe asset for some global investors as economic uncertainty continues. Bitcoin's rally has driven its share of the total cryptocurrency market capitalization to a new cycle high of 60.56%. For crypto investors, this may, conversely, indicate a risk-off move, as they shed holdings of riskier alternative currencies (altcoins) in favor of the market leader ahead of the U.S. election. https://www.coindesk.com/markets/2024/11/04/bitcoin-hits-record-high-against-blackrocks-us-treasury-etf-as-investors-search-for-returns-van-straten/

2024-11-04 15:29

How will Polymarket and Kalshi resolve their presidential contracts if there's another Jan. 6 or Bush v. Gore situation? At first blush, it looks redundant. The weekend before the U.S. presidential election, crypto-based prediction market Polymarket spun up a contract betting on who will be inaugurated as the next leader of the free world. As anyone who has paid the slightest bit of attention to crypto or election news coverage this year knows, Polymarket already had a heavily traded contract on which candidate will win the presidential race. That contract has seen more than $3 billion in trading volume, according to Polymarket, with more than $200 million worth of open interest, or positions outstanding, according to a Dune Analytics dashboard prepared by the user mahdi0077. There's a subtle difference between the "winner" contract, which Polymarket has listed since February, and the new "inauguration" one. That difference highlights a challenge facing prediction markets ahead of Tuesday's vote in a politically polarized, low-trust environment. Namely: What if the election results aren't clear shortly after the polls close? Or, if they are clear to one side, what if the purportedly losing candidate disputes them, as Donald Trump did four years ago, leading to the Jan. 6, 2021 Capitol riot? Or if one candidate concedes but then withdraws the concession, as Democrat Albert Gore did in 2000, leading to a Supreme Court case? There "could be a hornet's nest about this next week," Koleman Strumpf, an economics professor at Wake Forest University in North Carolina, told CoinDesk by email last week. 'Winner' vs. 'inaugurated' In prediction markets, traders bet on verifiable outcomes of real-world events in specified time frames. Typically, they buy "yes" or "no" shares in an outcome, and each share pays $1 if the prediction comes true, or zero if not. (On Polymarket, bets are settled in USDC, a stablecoin, or cryptocurrency that trades one-to-one for dollars; other platforms, including Kalshi and PredictIt, pay out regular greenbacks.) As of Monday morning in New York, "yes" shares for Trump winning the presidency traded at 59 cents, indicating the market saw a 59% chance of victory for the Republican candidate. Democrat Kamala Harris' odds were at 41%. The rules for Polymarket's "winner" contract say it will resolve once all three of the Associated Press, Fox News and NBC call the race. However, if all three media outlets haven't done so for the same candidate by Inauguration Day (Jan. 20, 2025), the market will be resolved according to who is inaugurated. By contrast, Polymarket's new "inauguration" contract doesn't bother with press sources, and will wait until Jan. 20 to resolve. If no one has been inaugurated by then, it kicks the can to Jan. 31. And if no one has been inaugurated by then, both the Trump and Harris "yes" shares will resolve to "no," and "no" holders for both candidates will collect payouts, which would be an unusual situation. This is more in line with Kalshi's presidential contract, which resolves according to who is inaugurated on Jan. 20 (though the fine print says an inauguration doesn't count if "the first person inaugurated as the President serves only in an acting (i.e., temporary) capacity"). "There may be disputes among the candidates and media about who wins the election, but only one will be inaugurated as determined by the official Executive Office of the President," said Jack Such, Kalshi's head of market research. "For this reason, we believe resolving on inauguration day is the safest choice for our customers because it provides the highest clarity of resolution criteria." A Polymarket representative wouldn't comment for the record. 'A big headache' There are tradeoffs between the two approaches. "The Polymarket resolution has the benefit of potentially resolving sooner, at [a] time when agreement on the resolution is generally accepted — and this might make it more popular because of the time value of money," said Aaron Brogan, a lawyer who has studied prediction markets. (Offsetting the potential opportunity cost of a delayed payout, Kalshi is paying clients 4% interest on open positions, Such noted.) On the other hand, a media outlet could make a call and then reverse it, as the Chicago Daily Tribune did in 1948 following the infamous "Dewey Defeats Truman" headline. "If the Polymarket contract resolves, and then one of the sources flips, it could be a big headache and a lot of litigation for everyone involved," Brogan said. Potentially complicating matters, Polymarket uses UMA, a decentralized oracle service, to resolve markets and referee disputed outcomes. When a dispute arises, UMA token holders debate the matter a day or two, then vote on which side is correct. An article in The Atlantic last week noted that UMA made a contentious decision earlier this year, resolving Polymarket's Venezuelan election contract for the opposition leader (who got more votes), despite incumbent Nicolas Maduro reportedly stealing the election. Polymarket has overruled UMA at least once (though not in the Venezuela case). UMA co-founder Hart Lambur did not respond to a direct message sent on X (formerly Twitter). 'Both bad' Flip Pidot, a prediction market veteran who wrote about 5,000 contracts for PredictIt, said the resolution criteria for Kalshi's and Polymarket's main presidential contract "are both bad." Kalshi's criteria, tied to the inauguration, "aren't necessarily ambiguous (which is the worst possible scenario), but they're potentially out of sync with the spirit of the market, which is who'll win the election," said Pidot, who is now CEO of American Civics Exchange, an over-the-counter dealer of political contracts. For example, "Trump could win, [then] die or be incarcerated or for some reason decline to be inaugurated, and J.D. Vance would 'win' the market (which means all traded outcomes would resolve No)," he said. "Or litigation or outright chaos could reign until past 1/20." As for Polymarket's criteria tied to the three media sources, "any of those three outlets could say it's 'indeterminate' or 'too close to call' indefinitely, in which case you're left with the same inauguration test as Kalshi, which again, doesn't really match the test that's being traded (who wins the election)," Pidot said. "I think everyone's trying to [punt] past the voting of the electors in December [and] the Congressional tabulation in early January, so that they don't get snarled in a 2020-like scenario if there's lots of chaos," he said. "But the Jan. 6 tabulation is really when someone certifiably wins the election, so that's what it should be tied to." https://www.coindesk.com/markets/2024/11/04/if-us-election-is-disputed-prediction-markets-could-face-hornets-nest/